Pepsi Bottling improves operating free cash flow in 2009 first half

By Jennifer Lanning Drey

Portland, Ore., July 8 - Pepsi Bottling Group, Inc. improved its year-to-date operating free cash flow performance by about $300 million in the first half of 2009, reflecting improvements in working capital management and more efficient capital spending, Alfred Drewes, chief financial officer of the company, said during the company's second-quarter earnings conference call held Wednesday.

The company confirmed its guidance for full-year free cash flow of $525 million.

"We're really stepped up our focus on working capital management, and we're pleased with our results so far," Drewes said.

Additionally, Pepsi Bottling is on track to achieve $265 million of cost and productivity savings for 2009, the company reported Wednesday.

At the same time, Pepsi Bottling remains focused on investing in future growth and will continue to pursue capitalizing on opportunities for bottler consolidation in the United States, while investing in its largest international growth markets, Eric J. Foss, chief executive officer of Pepsi Bottling, said during the call.

"While we're still facing a challenging economic environment, we believe we have the right strategy, the right operating capabilities and the right people in place to continue delivering good results," Foss said.

Improving trends

Foss also said Pepsi Bottling is confident in its positive outlook for the second half of 2009 due to improving carbonated soft drink trends in the United States, stronger foreign currencies and commodity-cost deflation.

The company expects currency-neutral topline growth in the low-single digits and currency-neutral operating income on a comparable basis to grow in the low to mid-single digits for the year.

For the second quarter, Pepsi Bottling's net revenue per case improved 5% on a currency-neutral basis, with growth across all reporting segments. Second-quarter net income was $211 million, which included an after-tax net gain of $39 million resulting from the settlement of tax audits, previously announced restructuring charges and advisory fees relating to PepsiCo's proposal to acquire Pepsi Bottling.

The figure compared with net income of $174 million in the comparable 2008 period.

"Overall, we feel very good about our Q2 performance. We've now exceeded our earnings targets for two consecutive quarters, and at the same time, we've made a number of moves to build this business for long-term growth," Drewes said.

Pepsi Bottling, based in Somers, N.Y., is the world's largest manufacturer, seller and distributor of Pepsi-Cola beverages.

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